Scandal Repair

It was a year ago this month that former Giuliani aide Russell Harding left his job as head of a city housing agency, but the cost of repairing the damage that occurred during his reign there continues to mount.

To date, the New York City Housing Development Corporationwhose funds are supposed to be used to finance affordable housinghas spent more than $388,000 for a high-powered private law firm to conduct an internal investigation of fiscal abuses that occurred under Harding.

Much of the scrutiny has been on Harding's profligate spending spree, in which he and a top aide splurged more than $250,000 on lavish dining, posh resorts, and gifts to friends. The probe has also focused on the policies and procedures that allowed Harding to plunder the corporation's expense accounts without setting off any in-house alarm bells.

The corporation turned to attorney Bruce Yannett, a former assistant prosecutor on the Iran-Contra case who is now a partner at the law firm of Debevoise & Plimpton, after the city's Department of Investigation and the Manhattan United States Attorney opened probes of Harding's conduct. Those investigations, in turn, were launched after the Voice won an 18-month tug-of-war to obtain Harding's expense records under the Freedom of Information Law.

Harding's escapades are still too sore a subject for agency officials to openly discuss. Both corporation president Charles Brass and board chairwoman Jerilyn Perine, who doubles as commissioner of the city's far larger Department of Housing Preservation and Development, declined to comment, citing the ongoing investigations. A spokeswoman for the housing corporation said that recommendations for policy changes stemming from Yannett's review will be made next month at a meeting of the agency's board of directors.

One agency official, who declined to speak for attribution, summed up the cleanup problem at the agency.

"We had a situation where the president and one person he brought in were essentially corrupt," said the official. "They blockaded information going to the responsible people." Part of the problem was fear: Harding is the son of Raymond Harding, the Liberal Party leader who guided Rudy Giuliani's campaigns and who was hot-wired to City Hall during his administration.

"We have looked at some of the intimidation that went on," said the official. "How do you tell people, 'Don't be intimidated by your boss who can threaten to fire you'?"

Concern over Harding's conductand the failure by any of his staff to report it to authoritieswas part of the impetus last month for the City Council's unanimous passage of a new law to provide further protections to whistle-blowers. Concerned councilmembers also spurred the city's investigations department to undertake a broad education effort last summer aimed at reminding city employees that it is both their right and duty to report wrongdoing they encounter on the job.

In December, two councilmembers, Eric Gioia of Queens and David Yassky of Brooklyn, wrote to investigations commissioner Rose Gill Hearn asking if her ongoing investigation into Harding included his obstruction of the Voice's Freedom of Information request. City administrators routinely stall such records requests, but Harding went a giant step further. He claimed, through agency lawyers, that the documents had been lost in an office move. Such actions, if proven, are a criminal violation of the state's Freedom of Information Law, although no one has ever been charged under that provision.

The councilmembers report that Hearn assured them that she is pursuing the matter.

Investigators have been plugging away at the criminal case since late March of last year. They remain mum about their progress, except to assure questioners that it is ongoing. But Hearn went well beyond the traditional DOI "no comment," in a statement issued last week, when asked about the case's status: "This remains a very active investigation, but, as you know, we are prohibited by law, including grand jury secrecy law, from speaking about details. The length of time is a reflection of many facts and circumstances that we also cannot discuss except to say that none are the procrastination of prosecutors or investigators. The time that we may be able to reveal information to the public is when charges are filed."

Federal prosecutors also declined to talk about the casewhich includes allegations that Harding used his computer for child pornographywhile offering similar confirmations that it is being actively pursued.

Current and former employees of Harding's old agency report that investigators continue to press them about Harding's practices. Probers have also asked about other former Giuliani aides who were friends of Harding's and who were allowed to enjoy some of his spending perks. They include former city housing commissioner Richard Roberts, now the chairman of the city's Health and Hospitals Corporation, who got a credit card that he used at a New Orleans strip club, as well as free use of an expensive sports utility vehicle from Harding. Also still under scrutiny is Vincent La Padula, a former top Giuliani aide and current senior adviser to Mayor Bloomberg. La Padula was treated to a free round-trip to Portland, Oregon, in July 2000, by Harding, who billed the charges to his agency.

For its part, Harding's camp appears to be girding for bad news. Defense lawyer Gerald Shargel said he is still waiting for prosecutors to finish up. According to associates, Raymond Harding has told friends in the Liberal Party that he can't be counted on any longer for financial support of the party. His funds will be needed for any upcoming legal battles involving his son, he reportedly said.

A spokesman for Ray Harding denied the comment. "He said no such thing," said George Arzt.

Citing financial hardship, however, the party itself closed the doors of its Manhattan offices on December 31. A farewell message to members was posted on the its Web site last month. "It is a truism that money is the mother-milk of (organized) politics," it stated. "We no longer have the ability to raise the considerable amounts necessary to maintain the headquarters."

The party's fortunes, which soared when Giuliani entered City Hall in 1994, plummeted after he left office in 2001. Campaign records show it has been kept afloat over the past year only with loans from the Harding family and longtime party members. The office closing came after the party failed to reach the required threshold of 50,000 votes in last November's gubernatorial race. A new group, Liberal Party Associates, is being incorporated by party stalwarts, but it is essentially only a shell corporation designed to protect the 58-year-old party's name from would-be imitators.

Just what happens to Russell Harding appears to be a matter of more than passing interest to many New Yorkers. Since the Voice's series on Russell Harding last spring, readers have peppered the paper with pleas for updates on the scandal's status. One of them was Roger Simon, an attorney who served as chief of the Housing Development Corporation from 1979 to 1982. Simon said his interest in Harding's performance began even before the stories appeared. In 2000, Simon visited the corporation's then brand-new offices on Williams Street in Lower Manhattan, which were designed and built during Harding's presidency. He was startled at the sumptuousness of the workplace. Records show Harding spent more than $5 million on the new digs, which feature ornate chandeliers, bird's-eye maple cabinets, and top-of-the-line ergonomic chairs for all of its 120 employees.

"I was just surprised," said Simon. "It was very luxurious. I don't think that kind of money should be spent on furnishings; it should be going into the programs, into housing."